Inside Politics

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GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: ...in the army to hear me extend, hoo-ah!

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BERNARD SHAW, CNN ANCHOR: President Bush cheers the troops while some of the brass privately jeer his Pentagon budget.

JUDY WOODRUFF, CNN ANCHOR: Will the Bush team help prod Denise Rich to testify about Bill Clinton's pardon of her ex-husband? Also ahead...

SHAW: Anger at the airlines: senators pounce on a new report about customer service.

ANNOUNCER: From Washington, this is INSIDE POLITICS with Bernard Shaw and Judy Woodruff.

WOODRUFF: Thanks for joining us.

The photo-op was presidential; the promilitary message, upbeat. But Mr. Bush's latest theme of the week could not drown out the political discord over the state of the defense budget and the president's promise to increase it.

Our John King traveled with Mr. Bush to Georgia's Fort Stewart.

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JOHN KING, CNN CORRESPONDENT (voice-over): Hail to the chief, and a 21-gun salute for a new commander in chief who promises to boost military spending and morale.

BUSH: I deeply respect your service, I appreciate your sacrifice, and I know what your service and sacrifice achieve for our nation.

KING: Fort Stewart and the Army's Third Infantry Division welcomed the president for what the White House billed as an announcement of $5.7 billion in new military spending. But nearly four billion is for military health benefits approved during the Clinton administration.

And $400 million is the final installment of a previously approved military pay raise. The new Bush initiatives total $1.4 billion: $1 billion for additional pay raises beginning in October and $400 million to upgrade military housing.

BUSH: These problems, from low pay to poor housing, reach across our military and the result is predictable. Frustration is up; morale in some places is difficult to sustain, recruitment is harder.

KING: Mr. Bush took time during his first base tour as president to stop by a new military housing complex, and to enjoy a little lunch with the troops. But there is some early tension with the military brass. They want billions more in this year's budget for spare parts, maintenance, and ammunition, and some troops here say they sense a budget crunch.

UNIDENTIFIED MALE: There's been times when we haven't had ammunition and stuff like that, and I'm sure that has a lot to do with it.

KING: The president won't commit to additional money this year until his defense secretary completes a top-to-bottom review of Pentagon spending. Some Democrats suggest a retreat from Bush campaign promises. In a letter to the president, Senator Joseph Lieberman said the Pentagon had "critical needs" now and suggests the big Bush tax cut would:

"threatens our capacity to defend national interests here and abroad."

KING: Aides say the review is long overdue, but that Mr. Bush will in no way short change the military.

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KING: Now, administration officials acknowledge that paying for the tax cut is forcing tough spending decisions across the government. But they insist with better planning and more discipline and less pork barrel spending, that the Pentagon can meet its needs next year with just a modest budget increase -- Judy.

WOODRUFF: So, John, what does modest mean?

KING: Right now, Judy, the Clinton administration's budget for next year -- the projected fiscal 2002 defense budget was about $296 billion. The Bush team wants to go up to $310 bill. So, there is 14 billion right there.

But they also acknowledge, after this top to bottom review by Secretary Rumsfeld is done -- they expect that to be late spring, early summer -- the president might ask for even more. One of the reasons they're saying it will be so modest is to send a signal to other departments, because many of the Bush Cabinet secretaries upset that they're being told by the new budget director to cut some spending. WOODRUFF: And what is that about? Have any connection with the proposed tax cut?

KING: Part of it is the tax cut, part of it is the new administration's priorities and part of it is an acknowledgment that the Republicans now run all two branches of the government, the congressional and the executive branch, so they can't blame the Democrats any more as spending keeps going up.

Spending went up 6 percent in the last three budget cycles and the Bush team trying to trim that back to 4 percent and he has, of course, promised some increase to the Pentagon, he has promised a pretty big increase to the education department.

So, the president and the new budget director, Mitch Daniels, telling other Cabinet secretaries, you have to find other places to trim. Spending will go up, but they're saying it won't go up as much as it has in recent years.

WOODRUFF: And finally, John, when you say some of the military brass unhappy that the numbers are not going up at the Pentagon as much as they wanted; do they really have any recourse here?

KING: Well, certainly they have friends in the key committees in Congress. And it was just last week, several of those key lawmakers were grumbling at the administration, saying hey, you promised in the campaign not to short change the military. They need billions now: for ammunition, for spare parts.

And the generals and the admirals have, frankly, in the new administration's view, gotten used to getting their way with the key committees in Congress. The Bush team is not saying they won't get the money if they need it, they're saying this president wants to put his stamp on the budget process.

There was a bit of a tug-of-war of key members of Congress. The chairman of the Senate Armed Services Committee -- John Warner among them. But then there were some meetings and some back channeled conversations. The president saying he deserves the right to this review. And if there is emergency money needed, that they will get it, but on his timetable, not the timetable of the Pentagon brass.

WOODRUFF: All right, John King traveling with the president -- Bernie.

SHAW: The Bush administration may give Congress a helping hand in its investigation of former President Clinton's pardon of financier Marc Rich. There is also a new development in the flat over Clinton's New York office space. CNN's Bob Franken has the latest on both stories. He joins us now -- Bob.

BOB FRANKEN, CNN CORRESPONDENT: And Bernie, the general service administration could soon expect to be notified by ex-president Clinton that he is going to, in fact, set up his offices not in the midtown location which had price estimates as much as $800,000 a year attached to it, but instead in Harlem -- in a renaissance area of Harlem off of 125th Street.

Of course, ther's been a huge controversy over the price for facilities and the plush nature of them. And this response has been now President Clinton -- ex-president Clinton may decide that he wants to locate in the Harlem section in New York, an underdeveloped area. It is one of the controversies, of course, ex-president Clinton has faced since he left office. Another one has been the pardons, particularly the one of Marc Rich.

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FRANKEN (voice-over): House Government Reform Committee Chairman Dan Burton has begun the process of attempting to immunize Denise Rich against prosecution, trying to force her to testify about her role in securing a pardon for her former husband Marc Rich.

Ms. Rich refused to testify last week, cited her Fifth Amendment protections against self-incrimination. In a letter to the Justice Department, Burton

"In order for the committee to obtain all the relevant facts about the decision to pardon Mr. Rich, it will be necessary to immunize Mrs. Rich."